Complex commodities may include any commodity whose price determination is based on a variation of each one of a plurality of variable characteristics. Simple commodities, on the other hand, are commodities whose characteristics are expected to match the quality requirement for a single characteristic. For example, steel is a simple commodity, where a steel gauge value denotes a number of characteristics which meet a minimum quality requirement. Also, gasoline is a simple commodity where grade (e.g., super, plus, regular, unleaded, etc.) covers a minimum quality value (i.e., an octane value) of other characteristics. Unlike simple commodities, diamonds, for example require a classification by a number of characteristics such as, among other things, color, clarity, cut, and shape. Another example of a complex commodity is a product or other entities dealing with various commodities (e.g., petroleum products) which have numerous qualities or characteristics that can determine price such as, e.g., viscosity, sulphur content, pour point, flash point, sodium content, and ash content for fuel oil number 6.
Numerous auction Internet web sites exist for simple commodities but do not offer varying specifications for the plurality of characteristics which are part of the complex commodities.
Historically, auctions have evolved in a number of different forms. The three most common types of auction are ascending bid auctions, Dutch auctions, and reverse auctions. In an ascending bid auction (which is the most common form of an auction), the price bid is successively raised until only one high bid remains. In a Dutch auction, the opposite of an ascending bid auction, an auctioneer begins with a high price which is incrementally reduced until the first bidder accepts the current price offered. In a reverse auction, buyers submit sealed bids unaware of the other bids and the highest bidder wins. A contract tender system is a form of reverse auction where the commodity being offered is the contract. Automated forms of all three auctions are found on the Internet.
In an automated network environment such as the Internet, the auctions are typically conducted at particular Internet web sites established as exchanges to facilitate the transacting of goods. Typically, an exchange allows a plurality of buyers to place bids that are matched to offers from a plurality of sellers. A number of these exchanges exist catering to a large variety of goods. However, the exchanges providing the auctions for the complex commodities are uncommon because the variation of several characteristics that determine price often frustrates exchanges grouping multiple buyers with multiple sellers.
U.S. Pat. No. 5,950,178 describes one example of such exchange for the complex commodities. In particular, this publication relates to an automated system and method for facilitating the transactions in diamonds. The system allows the sellers to offer their commodity, diamonds or precious stones, at a specified offer price and buyers enter their bid price for the commodity. The exchange described in this patent matches, the offers and bid prices. Unlike the exchange described in this publication, the method and system according to the present invention provides that each auction is a separate auction where the buyers bid on the specific output of a seller, or sellers bid to supply the needs of a specific buyer rather than a multi-buyer to multi-seller exchange. Additionally, the present invention addresses the need for an automated exchange for trading of, e.g., prerefined petroleum products, where the variable characteristics of the commodity are accounted for in the price determination.
The plurality of variable characteristics that affect the price determination should be the physical characteristics of the commodity, and not the external characteristics such as the point of delivery or the transportation. Accounting for the external factors or dividing a commodity into certain classes does not identify the particular good as the complex commodity. Transportation may be a separate item which is distinct from the commodity itself. For example, U.S. Pat. No. 5,724,524 describes a system for listing, brokering, and exchanging a carrier capacity which can be used for transporting the commodity. However this system does not relate to the physical characteristics of the commodity being transported.
With respect to petroleum products, OPEC and non-OECD national oil companies produce approximately 51 million barrels per day of crude oil. A substantial amount of this production is refined and marketed as petroleum products. Currently, the primary marketing method utilized by the National Oil Companies (NOCs) is tenders that provide prospective buyers the opportunity to bid on available supply or in some instances sales to the NOC's. In most instances, these tenders take the form of fax bid offerings to approved customers. Otherwise, the bid process is conducted via the phone. The system, as it currently exists, often causes various problems which range from simple communication problems to more serious situations. In particular, the lack of the standardized and thorough distribution of information along with the possible exclusion or marginalization of potential bidders makes the current bidding process less than optimal. The above example can also be implemented for other complex commodities.
Automated system and method according to the present invention for the exchange of the complex commodities are currently not available. The current Internet based sites are, at best, bulletin boards posting information, but do not allow for the online automated auctions and tenders to take into account the multiple characteristics of the complex commodities.